Hello everyone, welcome back. Last session, we talked about a specific issue about Korea and the US Free Trade Agreement and its provision in Chapter 17, the public procurement. We also covered issue of Kourion in the 17- a Section where some industry is not open for GPA, the government public procurement agreement act, or the free trade agreement between two country. Today we're going to talk about a specific issue for the regulations and the rules of regulation in the US government for public procurement. Before were talking about this one. I want to share some idea, because a number of people send me the question about the benefit of having public procurement divisions. One of the main incentive or motivation for anyone out there to listen at this type of lecture for public procurement, you certainly interested in trying to get some benefit all participating public procurement. A simple question, but is not that simple answer, is, what is the benefit of doing public procurement business versus normal commercial business? I can say public procurement divisions are not easy to enter. Obviously, entry step is not that easy because there's rules and regulation, as we discussed. Also, there are so many things you have to follow and also you have to fully aware of condition, especially illegality for the conflict of interests.There is many thing you have to take into consideration when you do public procurement market versus commercial public procurement. Commercial public procurement all about having very competitive pricing and good quality. Then you have a good personal relationship with the buyer. But public procurement is a little bit different because you have to follow rules and regulation and then you have to prepare many different thing, but the benefit is a lot. I personally recommend, a lot of a young generation to be involved more in public procurement because this is something that you can compete, and get your business with a very fair and reasonable manner. The reason I'm saying that because when you start up with a new company, you may not have a lot of money and resources available. If you want to sell your product or your services to, for example, like a large house or this department store, any large corporation like Amazon or Microsoft, their supply chain management is very complicated and their procurement practices is very strict. Also they will consider many different things from your company, your financial record, your past performance, so it's very hard. However, when you're getting into public procurement market for example, as small businesses in the United States, there are so many different incentive for small business, even you as a trader. If you do not have any factory or manufacturing facility, you still can register the vendor and you can sell the item. Even the barrier is very high. Once you know how to deal with it, you can come up with a very good marketing and business development plan to stay very long time. Entries are high, therefore, a lot of people are discouraged getting into, but just take over some time and all about the preparation. You have to be prepared how to do it. Toward the end of this lecture, we are going to talk about the things or what you have to prepare, to be able to run a very successful business and to put all for public procurement market, even the barrier, the entry barriers are higher. The benefit is you get much longer instead of getting very short contract selling to large commercial entity like Amazon, you can enjoy much longer contract performance period with the public entity, because the public entity, once you demonstrated that you have reasonably good quality and then you have the good people to manage it and you have very good opportunity to maintain your contract. To summarize, benefit of the enter into public procurement visions versus commercial is barrier is high, but the benefit goes very long time and you can have a longer contract. The most important issue, you will get paid. As [inaudible] as we know a treasury department, especially as government in the richest country in the world has basically enormous resources. You don't need to worry about whether you're going to get paid or not. In terms of commercial benefit, I will say this is singular most important issue for the any vendor supplier to large corporation. You sometime worry about whether the buyer will go bankruptcy, or you like paid, but with public procurement as long as you deal with legitimate and then develop the country like US government, or any other OECD member country, you will not have a problem with getting money paid by the government. United Nation the same thing, they will pay you within 30 days. We can talk about the UN later on. Having said that, because of the benefit of the public procurement businesses there, obviously each country want to protect their public procurement market for their own citizen. There's a contradictory statement, one hand we have WTO, World Trade Organization, and the government of public procurement agreement in placed. Therefore, we have free trade agreement between Korea and America. Each country company we can go participate a public procurement business. Then again, other side that we tried to discourage anyone coming in Korea or coming in United State to do business with the government because, this is a tax money paid by the US citizen, and also this is the benefit, what the politician wants to see their citizen take a benefit. So we have to keep some balance in between. You can't close door entirely for other country to comes in. Protectionism is never be a good policy because we are living in a free world, we should encourage free trade. That is a principle of World Trade Organization. I'm going to talk about some of the rules and regulation imposed or in placed by the US federal government. Let's have a look at one by one. These are some of the legal term, so I don't expect you to understand all of them, but you easily can google it, have look at it, what is available? What are the definition and how this is relevant to your business? Maybe that's something that you need to understand a little bit. I want to talk about maybe, four different main area, and in addition to maybe defense area, I want to talk about RDP MOU a little bit. First thing is the Buy American Act and the TAA, Trade Agreement Act, and then the Berry Amendment. That's some of the regulation and laws imposed by US federal government. Number one, protect their local industry for sure, because of the benefit is there and the public fund, as we said earlier, formerly, PUN fund is for a US government. Incentive is basically, they give key to their general public or US citizen, or the company in the United States, not necessarily company from other country or none the Native American. Buy American Act, we call it BAA, maybe in summary, all US federal government, is said basically they encourage, when they procure goods and services, they want to see that all of their product or services should be first. That mean it is not legal obligation, but you have to take into consideration you should purchase first manufacturer in the United State. Cost of a domestic component in a unit in the United State, it should be over 50 percent of the total component. For example, if the price of the product is $100, that they want to see at least that the US made, or the cost component is 50 percent plus components should be made in US. Pursued all of the BAA, Buy American Act and they have a system in place, to give a prize preference to US product. The having Buy American Act, it is a very important for the US government, and also the company in the US, when they compete with the non-US company, they will have a price advantage. Before we jump there at the moment, if you compete with US company large cooperation, they can have prize preference about six percent, and small business you can have 12 percent. Basically, some of the Department of Defense Procurement Act, you can have up to 50 percent of price preference. When you give a price preference for US company, what they mean? That mean it is a penalty imposed for non-US company agent. For example, if Korean company want to sell a type of a product to US Department of Defense, let's say price is $10 and we don't have any way to get around Buy American Act, my price are becoming $150, so my price of $100, about the local company can have 50 percent of price preference, therefore, my project become $150 and the local price to same. That mean, we will miss out in term of the competition. This is a BAA, Buy American Act. The significance of the Buy American Act is very serious when it comes to evaluating the competition and the proposer. However, good news we have, especially for Korean company, remember we have Free Trade Agreement right WTO and GPA. US free trade agreement with Korea activated in the 2012 gave us the waiver basically for BAA. In other word, Korean company, because the two country has active trade agreement, Korean company moves over the product, except to those excluded public procurement item, like what we talk about Chapter 17-A, most of the general product are under the legal framework of the waiver. That mean non-Korean company need to suffer for this penalty issue. Except as I said, at Department of Defense. If you are not in the legal framework agreement with US federal government for Free Trade Agreement, you may have a lot more disadvantage than Korean company. In summary, Buy American Act is there to protect American local industries, especially for small businesses. At same time, it also discourage overseas supplier coming in to do business with US federal government. As a Korean company because we have Free Trade Agreement, under government procurement agreement, GPA, this condition is not relevant to Korean company, except towards item excluded from public procurement under free trade agreement, Chapter 17-A. Well, let's have a look at another one. We have Trade Agreement Act is another type of the regulation. This is actually complementary. The legal provision allows some of these TAA designated country can do business with US government. I'm going to share some of the information here in the country list. If you happen to be in this list, for example, there's a lot of countries cover here, obviously Korea is a cover under TAA country. Even with the country like Bangladesh, some of the smaller country are under cover. Most of the other small country in the Dominican Republic or even Bahamas is included. The trading volume may not be a large, but the spirit of having this TAA is giving that access to the ally of the US, the US coming into the business with the US government. For example, you have most of the European; France, Greece, and you can have it, this one as well. In terms of the Asian goal, you have the Hong Kong. I can see obviously, Korea, it's that not that many. Japan is there. If your country is not included in the TAA designated country, you will have a certain restriction to do business with US federal government. Later on, a later session, we are going to talk about how to do business with GSA, General Services Administration. GSA is a main government agency doing most of the day-to-day product procurement for US Federal Government. For example, some of the IT services and the cartridges, the paper or some of the medical supply and also medical equipment and devices. All this sort item procurement, they're using for GSA or Veteran Affair, VA schedule, we call a schedule which means a contract. So if you are not under TAA designated country list, you are not eligible to do business with US Federal government especially with the GSA and the VA agency. In Asia, we certainly want to see more Asian countries included in the TAA agreement, but the largest country obviously out of the global supply chain, China, is not there, India, is not there, and a country like Pakistan is not there. So therefore, if you come from those countries, you don't have any legal framework to do business with US federal government, especially with the government eBay, we call it electronic billing system or we call it IDIQ, Indefinite Delivery/ Indefinite Quantity platform with the GSA, the multiple award system contract, you're not eligible to participate. So the TAA, Trade Agreement Act is a very important element, giving a special favor for those countries that are coming in to do business with the US federal government. The other important regulation we can talk about is basically Berry Amendment. Berry Amendment is named after the congressman Berry, who actually submitted the regulatory issue and passed the Congress. So the Berry Amendment is only applicable for the department of defense, it's not for agency-wide. Berry Amendment had about 12 different sections and items, for example, some of the textile items, yarn or the fiber are not allowed to buy from overseas at all. So if you are the manufacturer of the clothing or uniform for US Army, for example, then no other country can sell those fabric especially the category under the Berry Amendment, you can sell it to US government. We have been talking about the three main regulations over here; The Buy American Act, Trade Agreement Act, and also Berry Amendment. Of course, these are the legal terms that you will not be able to understand all of them but I encourage you to maybe google it, have a look at it, and especially if you come from those countries not in this legal framework, maybe there is a good opportunity for you to double-check whether there is a legitimate qualification for your company to sell anything to US Federal Government. So if that is the case, if your country, for example, a country like India, it seems to me that there is a legal framework implemented here between two countries, therefore maybe if you are the company from India trying to sell your product under your name from India to US federal government, it may not be possible. However, one thing I want to make sure that if you sell your product to your partner in the United States, who are already selling their products or services to public procurement agency or contracting entity, you don't have any problem. So we're talking about the direct procurement market entry, and then we have a lot of rigid regulation like Buy American Act, but if you are prepared to deal with US company indirectly, you can sell it to public procurement market. So how you are going to deal and promote your business in indirect access, maybe that's something we can talk about in the later session. So this session in summary, there's three main legal framework here; Buy American Act, Trade Agreement Act, and the Berry Berry. Some discouragement, basically the Buy American Act as well as the Berry Amendment, some encouragement for the company from overseas countries, those countries under a TAA, those are the countries that can do business with US federal government.
